Sunday, April 3, 2011

Al Roth has been doing fascinating work designing matching markets. These include the markets for matching kidney donors and recipients, medical residents to programs, and assigning students to schools.

In these markets, small changes in the "rules of the game" can lead to big efficiency gains, and it's not always obvious how to best make those changes. That's where the kind of deep theory that Al does can have practical value.

[R]ecently, he and one of his students have been talking with Teach for America about improving the system it uses to deploy volunteers around the country.

Inspired by Roth’s work, these rising economists are also setting their sights on real-world problems. Some are looking at dating websites; others are interested in how universities could do better at scheduling their students’ classes. Like Roth, all of them envision a world in which economists, as unlikely as it may seem, are recognized as society’s mechanics.

As more of the value of the economy moves from the manipulation of physical objects to the design of institutions, the work of "mechanics" like Al will become more important. While it is common to view theory and practice as polar opposites, this work is a good example of how the synergies they can create when combined. It's also underscores that the "invisible hand" of the market can often benefit from some intelligent design by humans.